There is an element of “yeah, tell us something we don’t know” about the latest study into what fuels successful trading on the stock market.

Researchers have established a firm link between testosterone and earning power, but warned that too much can lead to irrational risk-taking.

The study confirms the stereotypes that have endured since the 1980s boom years.

But does it offer anything else?

John Coates and Professor Joe Herbert, of the Judge Business School at Cambridge University, studied the brains of City traders to discover what makes them tick – the cynics might suggest this wouldn’t have taken too long.

Yet there are important conclusions drawn from the study of testosterone levels and the impact on decision-making. Among lessons the research team is pushing is the need for trading floors to employ more women and older men who have lower testosterone levels and cooler heads.

Too much testosterone and younger male traders, riding on a winning streak, start to take irrational risks. There is then a direct link between made between this testosterone fuelled feeding frenzy and market crashes.

The researchers believe that high levels of the stress hormone cortisol, triggered by a rapidly falling market, inevitably leads to anxiety and clouded judgment. “You tend to see danger everywhere rather than opportunity,” he adds. “In that situation you don’t do anything.

“People get paralysed by the fear. [It] takes over so they are no longer thinking rationally. They are no longer doing the things that they should be doing to make money.”

So, for every boom it creates, testosterone is most likely behind every bust too.

Welcome to the global credit crunch, ladies and gentlemen.

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3 responses »

  1. Ursula says:

    I am a great admirerer of testosterone. It has its use for the good. Otherwise nature wouldn’t have installed it by default.

    Men hunt and gather and in doing so become competitive. It’s in their blood. The trick is in channeling that force – something that some men manage better than others. And those who can’t keep the lid on the downside of their hormones I feel very sorry for indeed – whether on the trading floor, during a pub brawl or the playground. Big men shed the biggest tears when the toy they fought over is broken.

    As to the credit crunch – the British easily fall prey to their well documented siege mentality. Sure, prices are going up and will hit badly those whose purse was pretty thin in the first place. Nothing new there then. As to the well-off and the rich who, oddly, are always the first to piss their pants at falling share prices (sorry about choice of language) I am sure they’ll still be able to pay obscene amounts for a pair of designer shoes or a Rolex.

    Marx would turn in his grave if only he had enough space to do so.

    U

  2. Paul Groves says:

    Ursula: “I am a great admirerer of testosterone” – I guess that explains the fondness for Tre Azam.

  3. Ursula says:

    Paul, why, whenever being found out, am I reduced to laughing? Thanks for that. As before, your timing is impeccable.

    Yes, you are spot on. And Tre would be well accommodated by me since he prefers other people to iron his shirts (I am the only woman I know who enjoys ironing).

    As I am not a doormat, and my own testosterone levels being pretty high (for a woman), the question is: In the scheme of things who’d wipe the floor? I’ll mail you the answer.

    U

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